The head of an Iranian committee on foreign investment said reaching an agreement on nuclear issues will encourage oil companies to take another look at Iran. Iran's new face on the international stage might not turn things around overnight, but patience could pay off for the Islamic republic.
Jalil Jafari, head of the Foreign Investment Committee in the Iranian parliament, said an interim nuclear agreement reached in Geneva, Switzerland, with the United States, Russia, China, United Kingdom, France and Germany – the so-called P5-plus-1 – should open economic doors for Iran.
"The implementation of Geneva deal, slated to start Jan. 20, will bring with it great economic achievements for Iran in all fields, [e]specially [the] attraction of giant oil companies," he said.
Related article: Iran, Russia Ruffle US Feathers with Oil Swap Deal
Iran under the terms of a six-month agreement will curb some of its nuclear activity in exchange for relief from certain economic sanctions. Iran said last week it would still work on uranium enrichment, but at levels far lower than 20 percent.
Already, Iran has crowed over its investment opportunities during recent talks with Russian officials. An oil-for-goods deal could in theory bring in $1.5 billion worth of Russian goods to the Iranian economy each month given the current price for a barrel of oil.
White House spokesman Jay Carney said last week there were "serious concerns" about the Russian oil deal, which he said was not only inconsistent with the terms of the P5-plus-1 deal but could also trigger U.S. sanctions on Iran.
Nevertheless, Iranian officials have taken the interim deal as a sign Tehran was re-emerging as a viable player on the international stage. On Thursday, Iranian President Hassan Rouhani will personally try to convince international investors his country is ready for business when he speaks before the World Economic Forum in Davos, Switzerland.
The World Bank said the Iranian economy is the second largest in the region in terms of gross domestic product. Before Rouhani took office last year, the Iranian currency, the rial, collapsed under sanctions pressure and the moderate former nuclear negotiator is looking to turn that around.
Washington estimates the interim nuclear deal translates to perhaps $6 billion for the Iranian economy over six months. But Iran sees the deal as more of an investment opportunity, calling on everyone from Norwegian giant Statoil to U.S. supermajor Exxon Mobil to return to the country.
Related article: Iran Announces Development in Uranium Enrichment Technology
OPEC said in its monthly market report the Iranian economy is already showing signs of a rebound. Unemployment fell modestly and trade in non-oil goods between Iran and more than 150 other countries accounted for $62.5 billion in the nine months from March 21, the start of the Iranian year. Exports in petrochemical products, meanwhile, accounted for more than $8.1 billion during the same period, the cartel said.
But is there room in the global market for more Iranian oil? The increase in North American crude oil production has cut into OPEC's market share, though there are already signs from the cartel that Iran's crude oil output has increased.
BP said in its global energy outlook report that supply disruptions from countries like Iran removed more than 2 million barrels per day from the global markets last year. Without North American oil, OPEC would have been forced to act to keep the market stable, BP said. With some analysts already forecasting an end to the North American oil glut, Iran may be well positioned at the right time to make a comeback.
By. Daniel J Graeber of Oilprice.com